CLO spreads continue to ratchet in, despite weakness in the synthetic side of the CDO market. Alcentra has been the latest to take advantage of ravenous investor appetite. Jubilee CDO V, issued through arranger JP Morgan, saw strong demand right down the capital structure. After being initially marketed at €400m, the seventh European CDO from the manager came out at €555m.
Taking the long/short route, Triple A notes were offered in three classes, with €184.55m of 7.9-year securities in Class A1a pricing at six-month Euribor plus 22bp, while €155.55m of 8.2-year notes in A2 cleared at plus 24bp. Completing the Triple A picture was €28.9m of 10.3-year paper at plus 36bp, resulting in an average Triple A pricing of just below 24bp.
The Triple B notes from Jubilee V showed a substantial tightening at six-month Euribor plus 140bp.
“I thought the deal was too expensive,” said one investor. “At these levels I don’t think there is much leverage for spreads to tighten further, especially at the Triple B level.”
The collateral in Jubilee V is primarily senior secured leveraged loans, with a reinvestment period of six years. There is a 20% annual trading bucket and a weighted average rating of B+ on the portfolio. Mezzanine obligations can range between 7.5% and 25% of the total portfolio and there is an eight-month ramp-up period.
Elsewhere, spread whispers have emerged on the ?5.5bn Geldilux TS 2005-1 SME CLO from HVB. Triple A notes in Class 1A with a 3.1-year WAL are heard at three-month Euribor plus low mid-teens, Triple As with a 3.6-year WAL in 2A are talked at plus mid-teens, and 5.1-year Triple As are heard at plus high teens.
Next in the CLO pipeline is the €358m GSC European CDO II, while further out investors are talking about the €350m Avoca CLO 3, expected in the next two or three months through Deutsche Bank.
Before that, the Harbourmaster CLO 5 from Harbourmaster Capital through Bear Stearns is expected by investors in June, with a premium likely as only Fitch is rating the deal. BNP Paribas is working on the €306m RMF Euro 3 CLO and CSFB is marketing equity for Eiger Capital’s €325m Orion.